KALEKHAN MOHAMMAD HANIF Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Bombay Bench "A", has referred the following question for our decision:

(2.) MESSRS. Kale Khan Mohd. Hanifa firm registered under the provisions of the Income-tax Act, carries on business of manufacturing bidis in this State. For the years 1958-59 and 1959-60 the assessment of the firm was taken up by the Income-tax Officer. When the matter was ultimately taken in appeal to the Income-tax Appellate Tribunal, a new ground was raised before it that inasmuch as the partners of the firm were individually assessed and inasmuch as the Income-tax Officer had exercised his discretion in assessing the partners in their individual capacity, the Income-tax Officer had lost jurisdiction to assess the partnership subsequently. This question was allowed to be raised by the Income-tax Appellate Tribunal before it for the first time, as it was a question of law. The contention, however, was negatived by the Tribunal, but it made this reference as a question of law arose out of its decisions in the two appeals. As a common question is involved in both the appeals, a joint reference has been made.

(3.) THE legislature was aware that the assessment of the partners may take place before the assessment of the firm and in that case the share of the partners in the profits of the firm may not be correctly determined. Sub-section (5) of Section 35 was, therefore, inserted by way of amendment which enables the Income-tax Officer to rectify the assessment of the individual partners on the basis of the assessment made in the case of the registered firm In our opinion, therefore, after the 1956 amendment there was no scope for holding that the assessment of the individual partners precluded the assessment of the registered firm. Accordingly, we answer the reference to the effect that on the facts and in the circumstances of the case, the assessments on the firm made after all the partners had been assessed first on the share income from the firm, were valid. THE respondent shall get costs of this reference. Counsel's fee is fixed at Rs. 100.